If for any reason TT initiates the Schedule D, it will replace the default “qualified dividends and capital gain tax worksheet” with the “schedule D tax worksheet.”
If the amount in 1h is 20K or more, an adjustment is made. The built in algorithm is correct but the explanation for the Schedule D tax worksheet is outdated; the capital gains worksheet is still current.
Here is a copy:
Form 1116 (COPY 1) -- Foreign Tax Credit Comp Wks : Adjusted QDI income
Line 1l, columns A, B and C:
If the Foreign Qualified Dividends and/or Capital Gains Adjustment Smart Worksheet checkbox is not checked, from Line 1f.
Otherwise, from Line 1g, plus the result of one of the following calculations, depending on whether the Schedule D Tax Worksheet or the Qualified Dividends and Capital Gain Tax Worksheet is used:
If Schedule D Tax Worksheet is used.
- Line 1j multiplied by the Sch D Tax Worksheet, line 40, divided by the Sch D Tax Worksheet, line 11a. The result is multiplied by 0.7568.
PLUS
- Line 1j multiplied by the Sch D Tax Worksheet, line 11a minus line 40, divided by the Sch D Tax Worksheet, line 11a.
PLUS
- Line 1i multiplied by the Sch D Tax Worksheet, line 37, divided by the Sch D Tax Worksheet, line 11b. The result is multiplied by 0.6757.
PLUS
- Line 1i multiplied by the Sch D Tax Worksheet, line 11b minus line 37, divided by the Sch D Tax Worksheet, line 11b.
PLUS
- Line 1h minus line 1i minus line 1j, with the result multiplied by the following ratio:
-- Sch D Tax Worksheet, line 31, multiplied by 0.5405, plus
-- Sch D Tax Worksheet, line 28, multiplied by 0.4054.
-- The sum of the above two lines is divided by the sum of Sch D Tax Worksheet, lines 20, 28, and 31. The result is the ratio to be used. If the sum of lines 20, 28, and 31 is 0, the ratio is defined as 1.
NOTE: With the exception of the last line for how to calculate the ratio, the result of any calculation which has a 0 as a denominator is defined as 0.
If Qualified Dividends and Capital Gain Tax Worksheet is used.
- Line 1h multiplied by the following ratio:
-- Qualified Dividend/Capital Gain Wksht, line 20, multiplied by 0.5405, plus
-- Qualified Dividend/Capital Gain Wksht, line 17, multiplied by 0.4054.
-- The sum of the above two lines is divided by the sum of the Qualified Dividend/Capital Gain Wksht, lines 9, 17, and 20. The result is the ratio to be used. If the sum of lines 9, 17, and 20 is 0, the ratio is defined as 1.
NOTE: Calculated result may be adjusted by up to $2 to allow columns A, B, and C to add up to the Total column after accounting for rounding.
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If you are using the Schedule D Worksheet, here is a shortcut to calculate the amount retained on 1l. It does not include any amount in 1i or 1j, so if there are amounts in 1i or 1j, it will be an approximation.
The ratio:
(Line 30 x 0.4054) +(Line 33 x 0.5405)
Line 2a
Multiply the result by the amount in 1h and that should be or close to the amount in 1l, the amount retained. Subtract that from 1h and the result is in 1k, the amount adjusted ; (reduced)
